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A collection of Seminars and public interest  lectures from the Economics Department at the University of Canterbury50x50shadowmantis

maxstearns Prof Max Stearns of the University of Maryland ( home page here) , and a visiting Erskine Professor in the Economics Department, presented a very  interesting seminar on direct democracy. He asls the question: is direct democracy anti-democratic? His answer - yes - is surprising, and his method of analysis novel. After surveying the arguments for and against direct democracy's institutions (referenda and citizen initiated plebiscites ), Prof Stearns argues for a new approach. He develops a novel methodological standard  for comparing alternative institutions (using of a social choice framework to see which one of Arrow's axioms in his famous impossibility theorem is violated) Prof Stearn compares the  institutions of representative legislatures, those of judicial decision making , and the institutions of direct democracy . On this yardstick direct democracy is much closer to the courts - ie anti democratic - than it is to representative legislature.

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mortenlauMorten Lau
Professor Morten Lau , of Newcastle University, and  a visiting Erskine Professor in the Department, presented an interesting and thorough seminar on the theory, the econometrics, and the results of a field experiment on measuring (estimating) discount rates . After controlling for many potentially confounding factors no evidence of "hyperbolicky" discounting - ie declining discount rates through time ,  is found.

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hopeheadshotHope Corman of Rider University and the NBER gave a seminar in the Economics Dept on her research on the effect of child health on family resources. Professor Corman surveyed her earlier research in this area and then presented some new findings on the impact of childrens' health on housing, homelessness and crowding. Hope's home page Click on the blue .mp4 icon at the lower left of the video to download the seminar

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charleiPlottHeadshotCharles Plott of Caltech gave a fascinating talk on economics as a Laboratory Science for this years Condliffe Lecture in Economics (click here here to see more about John Condliffe and previous lectures in the series).  Charlie certainly kept the  high quality of the Condliffe lecture series going. He opened this years lecture by providing a brief introduction to how lab experiments undertaken by Vernon Smith almost 40 years ago opened up a window on decentralised decision making - how  intelligent but otherwise very ordinary moms and pops, 7-8 year old children right up to grandpas and grandmas, and even  Phd students, could be observed to "solve" a very complex problem of human interaction - arriving at an efficient allocation and transaction prices in a market setting. Precise predictions of both statics (prices and volumes traded) as well as dynamics (the time path of prices and trades) on the basis of theories can be made. His  "JAWS" animation showed that real time traders actually can and do make such predictions by looking at the unfulfilled buy and sell orders, and how long they remain unfulfilled, to  predict how the market is going to move, with great precision - but also not for long! The fish is on the move! With clever use of audio and video animation techniques  we watch as an asset market works to respond to supply and demand shifts, as well as to the presence (or not) of traders with inside information. Ditto for markets with Bubbles - where the deep base tones on the collpase of the bubble after the frenzied symphony of high (frequency) optomistic expectations help to convey just how wrong markets can also go. All of this detailed measurement and observation at the level of individual transactions and trading behaviour is made possible by lab methods. These lab methods are the bread and butter of the hard sciences - physics, chemisty, biology. But Charlie argues, and shows with an example of a predictions market internal to Hewlett Packard, the practical social return on new basic knowledge to lab methods in analysis of all sorts of  economically relevant institutions is dramatically faster and higher than in the physical sciences . To download a file with chapter markers click the .mov button at the end of the flash video :

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brendanmoylecrockmouthBrendan Moyle of Massey University (Brendans home page) , pictured here with his pet croc,  describes the recovery of stocks of salt water crocodiles from near extinction levels in the immediate postwar period. Since crocs are the biggest and most aggressive predators in the food chain in Asutralasia (maybe anywhere else too) , and have no fear of humans at all, it's not too difficult to figure out from a biological point of view why they're back on top once they becam a "protected species". The question remains however what sort of property rights and downstream international product market regimes facilitate or inhibit the croc's recovery. Once you watch this seminar and realize these guys eat  great white sharks for breakfast that snorkelling holiday you were going to take in Northern Australia won't be quite so attractive.

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Posted by John, 15-03-10 9:41am
property rights and residual claimancy
Towards ,the end of the seminar I rasied a point about incompletely specified property rights in managing crocoidle assets, in particluar the externality associated with the occasional human taken by crocs for food. Erci jumped in and said something like ordinary folk could protect themselves as residual claimants by going out and smashing eggs to protect thesmelves. Thinking about this I think there is a (huge) hole in Eric's argument. First, we don't have one suburban resudual claimant but hundreds of thousands, each of whom has a positive chance of being taken to lunch by a croc. SO there is a lareg transaction cost associated with fidguring out distribution of costs and benefits that would improve efficiency. Crudely ascertaining the value of a life lost at say $US3 to $US7 million for the sake of argument - and the chances of losing that life to a croc being dependent on proximity to their habitat, one could work out some kind of aggregate risk adjusted net present value that might be set off against the costly and risky enterprise of visiting croc habitats (not my job please). But the real question here is decentralised action. Even if it were efficient in some aggregate sense to go out and smash the eggs, who has the incentive to do it. While some OZzie blokes might not mind wouldn't mind cracking back a Fosters and heading out for a days egg smashing eggs in the wetlands, more sensible folk might recognize that it's really easier to have a reduction in probability of a croc snatch by letting someone else do this costly and risky job, and if no one else does it, well do you really want to be croc fodder so someone else can benefit. After all, there are 50K crocs now and just little the bloke , his sheila, and his little roos out in the wetback . What I'm trying to say is that resiudal claimancy status on this croc resource is VERY incomplete...and I don't think it can be contracted around very easily. John F
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davidjacksSFUDavid Jacks from SFU (homepage) presents an interesting seminar outlining his research on trade booms and busts over the last 100+ years in the global economy.  The paper not only synthesizes a long  span of data but also highlights the central role of trade costs at a bilateral level  in  explaining  the booms and busts in global trade .

From the paper's Abstract:
What has driven trade booms and trade busts in the past and present? We derive a micro-founded measure of trade frictions from leading trade theories and use it to gauge the importance of bilateral trade costs in determining international trade flows. We construct a new balanced sample of bilateral trade flows for 130 country pairs across the Americas, Asia, Europe, and Oceania for the period from 1870 to 2000 and demonstrate an overriding role for declining trade costs in the pre-World War I trade boom. In contrast, for the post-World War II trade boom we identify changes in output as the dominant force. Finally, the entirety of the interwar trade bust is explained by increases in trade costs.

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simon gaechter 2Simon Gachter of the University of Nottingham (Simon's home page) kicked off our formal seminar series for 2010 with a brilliant exposition and description of his current research work on voluntary cooperation and performance incentives. Simon provided an excellent  review of the evidence from a wide range of sources that is now accepted as a stylized fact:   higher levels of  wages (levels which are independent of effort) do induce extra work effort, even when there is no material incentive to do so, and in fact  when there is a positive disincentive (cost of effort) to do so. He then explained an experiemntal design to evaluate hypotheses about whether explicit perfomance incentives (in the forms of fines or bonuses) would "crowd out" these incentives for extra effort. The short answer is that perfomance incentives do appear to crowd out the extra effort that "is" voluntarily provided . I put "is" in quotation marks because this is a statistical type phenomena . This is flash file that should play well in your browser - click on the blue .mov letters in blue to download)

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Posted by John, 19-02-10 1:14pm
regressions, scatter plots, and distributions
The emprical distributions you have, especially the ones on repeated interactions, don't lend themselves to regression analysis - at least not the way that is usually viewed. Instead, we're looking for summary measures of Prob(effort levels >12|...conditional on various treatments and employer choices of target effort or compensation lelvels) . So it's really the scatterplots you present that convinve us of validity of your claims - the regressions add nothing, and might even detract something. I do think however that you could plot the cumulative empirical frequency distiributions for effort , or effort above 12, or effort above the target effort for the fine or bonus, , conditional on compensation or target effort, to show a strong stochastic dominance relationship here So descriptive statistics wise one might make a claim like .... no matter what the incentive contract is that is chosen (among the feasible ones in the experiment) levels of extra (above 12? above the target effort, or both) effort are always smaller with explicit incentives than without. John
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kevin davisKevin Davis of the University of Melbourne (homepage here)  presented an innovative , interesting and informative seminar on a new type of financial derivative contract known as a CFD. There are no published academic arguments on CFDS so you (listeners/viewers) are first off the block! As Kevin explains, a CFD is a type of future's contract on the shares in a company that is a substitute for holding individual shares - and also individual shares futures contracts. It is dividend protected, but becasue it involves an implicit loan from seller to buyer of the CFD it also involves an interest payment. In theory (via an arbitrage argument) a CFD should trade at the same price as the underlying stock - but the theory turns out to be only an imperfect predictor of actual CFD prices, partly because there is no  expiry date on the contract . Kevin discusses a number of historical and institutional (regulatory) characteristics of CFDs in the Australian markets and tests several hypotheses about the equality between CFD prices and stock prices, as well as about the size of bid-ask sp[reads in the CFD market.

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jamesalmProfessor James Alm of Georgia State University (homepage) presented a stimulating seminar on the question of why people do - or do not - pay their taxes. As Jim's abstract says:

The traditional “enforcement” paradigm of tax administration views taxpayers as potential criminals, and emphasizes the repression of illegal behavior through frequent audits and stiff penalties. However, an important trend in tax administration policies in recent years is the recognition that this paradigm is incomplete. Instead, a revised “service” paradigm recognizes the role of enforcement, but also emphasizes the role of tax administration as a facilitator and a provider of services to taxpayer-citizens. While such “kinder, friendlier” provisions may improve the image of the tax authority, and indeed have been an essential part of many recent tax administration reforms around the world, their actual effect on tax compliance has never, to our knowledge, been quantified. This research utilizes laboratory experiments to test the effectiveness of taxpayer service programs in enhancing tax compliance. Our basic experimental setting mimics the naturally occurring environment: subjects earn income, they must choose whether to file a tax return, and they then must choose how much of their net income to report to a tax authority that may audit the subject. To investigate the effects of taxpayer services, we “complicate” these compliance decisions of subjects, and then provide “services” from the “tax administration” that allow subjects to compute more easily their tax liabilities. Our results indicate that tax agency provided information on an individual’s tax liability has little impact on the tendency of an individual to file a tax return, but that this information has a significant and positive effect on reporting for individuals who choose to file a return.

The paper is available for download on Jim's home page. Here is the  webcast of Jim's seminar.

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seamusheadshotSeamus Hogan presented an interesting and informative seminar on the  claim that there has been overcharging in NZ electricity markets on the order of $4.3 billion dollars over a recent 7 year period . This sizeable welfare loss calculation comes from a report by Frank Wolak (Stanford), commissioned by the  Commerce Commission. Seamus provides a detailed explanation and a critical deconstruction of the Wolak Report argument suggesting that the real number may be far removed from $4.3 billion!!  - and that in any case  $4.3 Billion  is far too sensitive to assumptions to be useful for policy purposes. He is skeptical of finding a suitable  methodology in the Wolak report about how to detect "overcharging" . For example,  the firms who are alleged to be overcharging in the wholesale market are also the customers buying in this market - ie the market is vertically integrated - something not accounted for in the Wolak model.  Seamus makes good use of basic micro econ theory to elaborate on the  assumptions on both the demand and supply sides of this market  that are necessary to support the Wolak Report's  $4.3b welfare loss  figure. Besides ignoring the vertical integration in the market (which vastly reduces - in theory- the incentive to overcharge) the observed price variations are pretty much in line with what one would predict from a basic peak load pricing model (with supply side not demand side peaks  driven by winter weather conditions). Finally, the interesting pricing questions appear to be in the retail and transmission markets, not in the wholesale market. (video 80 minutes)

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sunProfessor Qian Sun of the Institute for Financial and Accounting Studies, Xiamen University in the
People’s Republic of China(homepage here) presented an interesting seminar " Non-negotiable Shares, Controlling Shareholders, and Dividend Payments in China" (download pdf of the paper here) . Qian explained the interesting, and complex,   institutional structure for mixed private and public ownership in China , a memorable feature of which is a rather unique segmented market:

China had a unique share segmentation system during our sample period: the shares of listed firms had been segmented into two categories, negotiable and nonnegotiable (Li, Wang, Cheung, and Jiang, 2008).2
1 The state is usually the largest shareholder. In about half of the listed companies, state ownership exceeds 50% of the total shares. The former was tradable on the stock market and mainly held by individual investors, while the latter was non-tradable and mainly held by the government (state shares) and other legal entities (legal person shares). Legal persons are often connected to the government in various ways. Fourth, negotiable shares, on average, only accounted for about one-third of the total shares during our sample period. Hence, negotiable shareholders were usually minority shareholders in a firm and would not be effective in monitoring management and the controlling shareholder. Finally, cash dividend payments have been required by the China Securities Regulatory Commission (CSRC) since 2001as a precondition for listed firms to have rights issues.
A set of interesting quantitative research questions on the existence and level of dividend payments for these enterprises were asked - and answered - in the remainder of the seminar. On the one hand, since public sector managers have non tradeable shares they may engage in wealth extraction by having high dividend payments. On another hand , the dividend payments may be useful ways of helping small and widely held negotiable shareholders solve their agency problems in controlling wealth expropriation by controlling (but non negotiable) public sector shareholders and their mangers.

Please note that there were many interesting questions during the seminar...but they are only barely audible. When viewing/listening to the seminar just wait thru these pauses until Quian provides an answer (the reverse engineer an intelligent question!!) iphone compatible version for download - click the blue mv4 icon after the video interface below

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tedbergstromProfessor Ted Bergstrom (click here for Ted's home page )  , a visiting Erskine Fellow, presented an interesting and informative seminar : "One Chance in a Million: Altruism and the Bone Marrow Registry" based on a joint paper with Rod Garratt and Damien Sheehan-Connor . As ever, the discussion during and after the seminar was lively and provocative. (The photo of Ted reveals his continuing interest in evolutionary economics)

The abstract .

Transplants of donated stem cells save the lives of many patients with blood diseases. Donation is somewhat painful, but rarely has lasting adverse effects. Patients can accept transplants only from donors with compatible immune systems. Those lacking a sibling match must seek donations from the population at large. The probability that two persons of the same race are compatible is less than 1/10,000. Health authorities maintain a registry of several million genetically-tested potential donors who have agreed to donate if asked. We study the peculiar structure of voluntary public good provision represented by< the registry, and compare the marginal benefits and marginal costs of expanding the registry.

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Further information on the seminars at the Economics Department , and the timetable for this year, 2009, may be found here.

Posted by John, 09-03-09 10:09am
Knowing your type and DNA spammers
This was a great seminar Ted. Thanks. One question I have is whether or not this Donor Registration system is a least cost way of of discovering matches. For example, my understanding of research into viruses and how to detect emerging viral plagues is that detailed micro arrays of a huge variety of viral genomes are available and used (see a fascinating talk on this here) are used to do basically the kind of match ups (at the molecular level) that the blood donor registry guys use. And if every baby born has its full genome in a database , accessible to someone,  surely the need for the registry for typing purposes is , or will become, moot? But that raises a second question....kind of related to my comment toewards the end of the seminar...if my DNA is on record in a system that permits these easy kinds of matchups...how can I avoid DNA spammers? ie everyone with a health problem of any type that might be genetically similar (on someone's metric) to mine asking if they could please have a donation? More generally, isn't the reluctance to give tissue to any kind of registry someting related to a strategic cost, not just the cost in pain and time to have the bone marrow extracted?
Posted by Deleted, 09-03-09 10:58am

Thanks Ted, I also really enjoyed your seminar. One question I did have was around the age beyond which members are no longer able to donate. I think the age was around 60? Is this because your bone marrow degrades beyond that age or because the risks associated with physically donating material become greater? I would have thought the age cut-off would have been greater for women, since women live longer on average.

Just thinking about John's post above, wouldn't you still need the register for two reasons? First the register provides a means of gaining consent and second it links contact and other relevant details to your biological profile. So even if there was a genome database you'd still need the register right? 

Posted by Deleted, 10-03-09 11:25am
Thanks for the interesting comment. The current practice is to remove people from the registry when they reach age 61. The only study that I have found on the effect of the donor's age on success of the transplant is in a paper by Kollman et al in the journal Blood October 2001. Based on a sample of about 7000 patients, the authors find that the likelihood of patient survival is significantly higher if the donor is younger. Fiver year survival rates are about 33% if donor is under 30 29% if donor is between 30 and 45 and 25% if donor is betwee 45 and 60. Kollman et al suggest that this indicates that when multiple matches are found, age should be used as a selecting principle. (From their remarks it is implicit that this was not the practice in 2001. I don't know if it has changed.) Whether a perfectly matched donor who is older than 60 would be better than a donor who is not a perfect match but much younger does not seem to be known. There doesn't seem to be any evidence that the reduction in success for older donors is any different for females than for males. Kollman's results also seem to suggest that there is a strong case for active recruitment of 18 year olds in the bone marrow, with the hope that the use of donors over 30 years old could be made relatively infrequent, though it would be useful to keep people of rare types in the registry until age 60 or higher. I haven't found any further discussion of this issue in the medical literature. As you suggest, the register is used not only to determine type but to gain consent and to maintain contact. As far as I can see, even if there were a very large genome data base in existence, something like the register would still be needed.
Posted by Deleted, 10-03-09 1:48pm

John, I simply don't know what genetic data is currently collected from "all" babies.  Presumably there is still some cost of "reading the HLA type" from each sample and I don't know how often that is done.  We could of course consider a thought experiment about what would happen if it becomes routine practice to record information including HLA type data on everyone at birth.   Then there would be an interesting question of privacy rights to that information.    Currently the bone marrow registries seem to be  very careful not to allow potential recipients the information needed to contact potential donors in any way except indirectly through the registry. 



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chrisbruceChris Bruce, visiting Erskine fellow from the University of Calgary, (click here for Chris's home page),  presented a seminar to members of the Economics Department on his research into collaborative decision making procedures and public policy. Chris describes his experiences with land-use  allocation decision making policies - and controversies -  in an iconic Canadian national Park, Banff.

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How much are advertisers willing to pay - and to bid - for the privelege of being at or near the top of search engine results. If you pay for a top spot for the word  "diamond" you might pick up the teenage school kid doing his homework assignment, but if you pay for "diamonds" wel..... Hal  Varian presented a very interesting seminar on Nash Equilibrium predictions of behaviour (bidding functions)  in Google Ad auctions. Deriving bid functions, one can infer valuations on bids - which Hal does, based on a set of inequalities emerging from Nash equilibria calcluations. Evrything you wanted to know - and discovered you didn't know - about 2 sided matching theory, applied to Google auctions.

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Condliffe Memorial Lecture - 18 March 2009
Professor Hal R. Varian, a former Erskine Fellow, is both an eminent economist and Google's Chief Economist. His recent lecture, Evolutionary Business - The Effect of Computer-Mediated Transactions, provided a fascinating and entertaining analysis of the changes taking place in e-commerce. The video begins sans a comment from Prof Nigel Healey about his book with Carl Shapiro  Information Rules: A Strategic Guide to the Network Economy click the link to check it out on Amazon where you can buy used copies for around the price of a cup of coffee, and believe me, you'll get a lot of more value out of this book (though reading it with a good cup of coffee will enhance the learning experience) If you want an mp3  audio podcast version of this talk click on the "more" button below the online viewer.  A downloadable version of Prof Varian's talk is available by clicking on the small "mp4" blue text below the viewing window. You can also watch it on ProudlyDismal on youtube. (Note some organisations and schools restrict access to youtube, but not to this uctv site). The slides for the talk are available here.

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